Many clients and enquirers are
aware that the tax year 2013/2014 has seen changes to the tax regime being
applied to their income and allowances. A good example of this is the fall in
the highest tax charge rate of 50% to a new lower level of 45%. More changes to
the tax regime are due in the tax year 2014/2015 and one of these points,
namely the Pension Input Period, or PIP for short may affect your pension
planning in this tax year (2013/2014).
The Annual Allowance (the amount
you can put into your pension without a penal tax charge being applied) is
dropping to £40,000 in the 2014/2015 tax year from £50,000. It is important
that you know the Pension Input Period (PIP) end dates for each of your pension
plans to ensure that you do not exceed the limits, attracting a tax charge at
your highest marginal income tax rate accordingly.
If the PIP end date
for your pension falls in the new tax year 2014/2015, then any contributions
will be tested against the reduced Annual Allowance of £40,000, rather than the
current Annual Allowance of £50,000.
Remember that not all plans will
have the same PIP dates and this should be checked on each plan that you hold.
It is also worth noting that Defined
Benefit schemes (such as a Final Salary scheme) are valued using a factor of
16, plus lump sum where applicable, over the Consumer Prices Index (CPI).
Therefore any increase in benefits increasing by approximately £2,500 for the
year over CPI will breach the new reduced £40,000 Annual Allowance (2014/2015).
If you would like to know more about this pension planning
and your tax allowances then please contact the team at Chapters Financial
Limited on 01483 578800.
No individual advice has been provided in the text of this
blog. You should seek independent financial advice (IFA) in your own
circumstances.
Keith G. Churchouse
FPFS
ISO22222 Certified
Financial Planner
Director and
Financial Planner
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